Hunt’s Budget U-Turn Is Taxing for Landlords
Landlords running property businesses as limited companies are likely to become one of the casualties of political in-fighting in Westminster.
Prime Minister Liz Truss had already announced the scrapping of her proposal to cancel the planned rise in corporation tax from 19 per cent to 25 per cent in April 2023.
New Chancellor Jeremy Hunt confirmed the increase in ditching the controversial mini-budget tax cuts his predecessor Kwasi Kwarteng had promised in his short reign.
Many property investors switched from running their businesses as individuals to companies to pay less tax. However, the 33 per cent rise in corporation tax will take a large bite from their tax savings and could make many landlords reconsider their business models.
The latest official data reveals that property people run more than 68,000 companies in the UK. That includes landlords, developers, letting agents and other property professionals.
What was ditched in the mini-budget?
Hunt argued the rise was necessary and would give the government £18 billion a year, while further savings would secure another £14 billion or so to spend on steering the economy towards growth.
His action plan means scrapping the prime minister's flagship measures, including:
- Retained - Corporation Tax increase from 19p to 25p
- Scrapped - 45 per cent top rate for those earning £150,000
- Scrapped - Lopping 1p off the basic rate of income tax
- Scrapped - Freezing duty on alcohol
- Scrapped - VAT-free shopping for visitors to the UK
- Retained - Stamp Duty boost for first-time buyers, with nothing due on the first £425,000 of a home’s value
- Retained - Stamp duty holiday for all buyers on the first £250,000 of a home’s value
- Retained - Reversal of 1.25 per cent national insurance hike in April 2023
Help with the cost of household energy bills will go ahead this winter - but instead of the scheme running for two years, the policy comes under review in April 2023.
Markets rebound as policies reverse
The Chancellor said: “Any government must do what is necessary for economic stability. This is vital for businesses making investment decisions and families worried about their mortgages, jobs and the cost of living. No government can control markets, but every government can give certainty about the sustainability of public finances.
“The government has decided to make further changes to the mini-budget and to reduce unhelpful speculation about what they are; we’ve decided to release them ahead of the medium-term fiscal plan due in two weeks to provide confidence and stability.”
The full details of Hunt’s policies should become more apparent on October 31, when he publishes how the measures he wants to bring are funded, supported by data from the Office of Budget Responsibility.
So far, the markets have looked kindly on his efforts. After his announcements, both the pound and the London Stock Exchange rebounded.
After his sacking, Kwarteng lost his seat in the Cabinet and returned to the backbenches.
VIDEO: Chancellor Jeremy Hunt’s speech in full
Who is Jeremy Hunt?
Hunt, aged 55, is MP for the safe Conservative seat of South West Surrey. He is married with three children. Before entering politics, HUnt was a pupil at Charterhouse, the public school, and graduated from Oxford with a degree in politics.
Before he was appointed as Chancellor, Hunt served as secretary of state for culture, media, the Olympics and sport (2010 - 2012); health (2012 - 2018); foreign secretary (2018 - 2019).
Hunt stood for the Tory leadership race won by Truss but was knocked out on the first ballot with only 16 votes from MPS.
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Tax is an aspect of residential property investment which is often overlooked. There are many twists and turns to consider at all levels, whether for income tax, capital gains tax or inheritance tax. It is vital to get the ownership structure right and ensure that all tax relief, allowances, and claims are made.